It’s not every day the Corporations Act reads like a whodunit, but section 9AC (1)(b) (ii) sets the stage for a surprisingly gripping inquiry: can a company be a shadow director of another company? The leading authority on this increasingly relevant question is Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd (2011) 81 NSWLR 47, and it’s a case that challenges the orthodox view of who really holds the reins in a corporate structure.

At its core, the notion of a shadow director centres on the requirement that the de jure directors of a company are accustomed to act in accordance with the instructions or wishes of the purported director (see Oliana Foods Pty Ltd v Culinary Co Pty Ltd (in liq) [2020] VSC 693 at [237]). The test is not satisfied by directors merely acting on advice which is independently considered and adopted; rather, there must be a demonstrable pattern of compliance with instructions or wishes expressed in the context of director-level decision-making.

In Buzzle, Apple was deeply embedded in the operations of its newly merged retail distributors. Not only did it have financial leverage over Buzzle, but it was also involved in advising on the structure of the merger, the accounting systems, due diligence, and future financial arrangements. Its representatives were installed in Buzzle’s offices and its advice—particularly financial—was closely followed. But Justice White ultimately held that this was not enough. These were, in his view, arm’s-length commercial interactions, not the machinery of shadow directorship.

This distinction becomes murkier when we consider why the directors of Buzzle acted in accordance with Apple’s wishes. Was it out of routine deference to superior bargaining power, or did it amount to a pattern of compliant behaviour sufficient to satisfy the definition of shadow director under s 9AC (1)(b)(ii) of the Act? The court held the former—but only just.

Of particular interest is whether a company can be a shadow director. The statutory definition in s 9 does not limit the concept of a director to natural persons, and case law has confirmed that a body corporate can fall within this definition. In Standard Chartered Bank of Australia Ltd v Antico (1995) 38 NSWLR 290, a related company was held to be a shadow director due to its capacity to control the board of the relevant company through its shareholding and decision-making influence.

So, if a company can be a shadow director, what does this mean for the web of commercial relationships that underpin corporate Australia? Is every major creditor or dominant consultant at risk of being dragged into the statutory obligations—and potential liabilities—of directorship?

Consider this: if a corporate lender installs consultants within a financially distressed borrower’s operations, exercises significant influence over financial decisions, and the borrower’s board routinely acts in accordance with that guidance, does this cross the threshold into shadow directorship? And if so, what are the regulatory implications? Can the ‘corporate mind’ of the influencing entity be attributed to a single decision-maker, or does liability potentially extend to the board of the creditor company as a whole?

This area of law presents a complex intersection of agency, control, and risk allocation. As inter-company relationships become more sophisticated and entangled, the distinction between robust commercial influence and de facto governance becomes increasingly blurred.